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Servicemembers Employ Recession Buffers, Still Seek Help

By Lisa DanielAmerican Forces Press Service

WASHINGTON, Aug. 29, 2008  Military members receive some buffers from hard times through benefits like housing and meal allowances, commissaries and a strong support network. But they feel the crunch of increasing prices like everyone else.

Finance professionals who work directly with servicemembers say they are seeing more requests for help from soldiers, sailors, airmen and Marines.

“We’re really seeing a lot of people asking for assistance,” said Kelly Stewart, a community readiness consultant who counsels airmen about their finances on Andrews Air Force Base, Md. “It just seems to get worse with the economy.”

On Camp Pendleton, Calif., “We’re seeing the military folks cut back on food,” said Mike Hire, director of the Navy/Marine Corps Relief Society there. “Just like with other Americans, folks are looking for bargains and store brands, and they’re buying things that go further. Maybe you haven’t eaten rice or spaghetti as much as you do now.”

The pinch has been especially hard on young servicemembers who aren’t old enough to remember the last economic slowdown, let alone have never juggled finances through a recession, financial advisors say.

“You have a number of folks who come into the military and are making more money than they ever thought they would,” Hire said. “The problem is, they don’t understand how much it is going to cost. They don’t think in terms of hard economic times; they think in terms of how much money they have.”

Where people tend to make mistakes is in not having enough savings to cover unexpected costs, Hire said. When people put pen to paper and create a budget, most draw a fixed income line and fixed expense line. That’s a mistake, Hire said. “Expenses are never solid. They move up and down all the time. That’s where people get into trouble,” he said.

Lynn Olavarria, manager of the financial readiness program on Fort Bragg, N.C., agreed that education and self control on spending are key to keeping finances in check. “What I’m seeing is young people coming out of their parents’ home and they have no kind of background for dealing with finances,” she said. “Everybody wants everything now. I’m seeing that change more all the time. It’s the instant-gratification generation. They incur debt quickly because we all know how easy it is to get credit.”

Financial readiness programs are widespread to educate military members about their personal finances and classes are mandatory at first-duty stations, Olavarria said. The services offer financial counselors free of charge, as well as outreach programs, because of its impact on military readiness.

“When financial problems are introduced into an airmen’s life, their mind might be other places and it can affect the mission,” Stewart said.

Servicemembers go to financial counselors for basic budgeting, referrals for interest-free loans, and sometimes because they are in danger of losing their security clearances due to financial problems, Stewart said. “Some clients I see have hundreds of thousands of dollars in debt -- credit card debt, judgments, it varies,” she said.

Finance experts have this advice for military members to improve their financial shape: Take advantage of your benefits and support network; make smart spending choices; and save more.

There are many programs set up for military members to save money. The Military Savings Deposit Program allows those deployed to combat zones to have money automatically taken out of their paychecks and placed into a savings account. Servicemembers earn 10 percent on the balance of the savings up to three months after their deployment ends, said Maj. Burke Beaumont, comptroller of the 316th Mission Support Squadron at Andrews Air Force Base, Md.

Contributing to an interest-bearing savings account and also to the government’s Thrift Savings Plan for retirement “is a no-brainer,” Beaumont said. The challenge is in making those contributions rather than spending additional money, such as those made from combat deployments, on things like expensive vehicles, iPhones and other status symbols, he said.

“You need to put that money to something you could use in the future,” Beaumont said. “I’m seeing a lot of really nice cars on base: corvettes, brand new Mustangs, Hummers. That’s money you could be investing.”

Military members also must be careful not to use predatory lenders that charge very high interest, solicit around military bases, and make it simple to get a loan, Beaumont and other financial advisors said. The problem has gotten so bad that Congress last year passed a law that caps the interest rate on loans to military members at 36 percent.

“But 36 percent is still a lot, and they really reach out to military members,” Stewart said. People get themselves in trouble with loans by not considering the impact of paying off the full amount with interest, she said. “People say, ‘I can afford to pay $115 a month. What they’re not looking at is that they are going to pay back $5,000 on a $3,000 loan.”

Predatory or “payday” lenders have gotten so common around bases that most financial readiness programs offer free classes on base to teach about their dangers, the financial advisors said. Also, Army Emergency Relief has started a new program that soldiers can use in place of private lenders. Under the Commanders’ Referral Plan, a soldier can receive interest-free loans of up to $1,000 twice per year with a commander’s referral, Olavarria said.

In fact, all four services have relief societies represented at most bases that give interest-free loans and, occasionally, grants. If a servicemember has to choose between paying a bill late -- and possibly messing up his credit rating for years -- or getting an interest-free loan from the relief society, then they should choose the society’s help, advisors say.

“Military members are lucky because they have relief societies like ours,” Hire said.

The Navy/Marine Corps society at Camp Pendleton doled out $3.8 million in emergency aid in 4,668 cases in 2007, he said. Those numbers will be similar for this year and are up from $2 million in 2005 and 2006, he said.

Here are some other tips from military financial advisors:

-- Be hesitant about trading in your vehicle for one that uses less gas. Because of the devaluation of vehicles and the increased taxes required on a newer model, you may be better off to maintain the one you have.

-- Live near your work. High gas prices can diminish the savings on rent and mortgage farther away. Living on base also saves on utilities.

-- Save for emergency expenses. “We see people everyday for whom something has happened and they don’t have the money to pay for it,” Stewart said. “Just having the piece of mind of having that money in your account is a good way to live.”

-- Use cash and check books more than credit and debit cards. “Because of debit cards, people overextend themselves constantly,” Stewart said.

-- File travel vouchers on time and keep your government credit card paid off. Officials recommend setting up automatic withdrawals from servicemembers’ paychecks that will move money into their travel card accounts. “The servicemember is 100 percent responsible for paying off the balance of the card” when the individual charges costs that aren’t covered by per diem, Beaumont said.

Like those working for other services, Olavarria said it is important that soldiers reach out for the many ways that the military can help with personal finances. “Everything a soldier can possibly need, the Army is going to do its very best to help them,” Olavarria said.

An Army Community Service office is located on every post and can help soldiers or give referrals of help for almost any problem, she said. Furthermore, all installations and their surrounding communities sign onto what is known as an Army Family Covenant, which is a vow to support soldiers in any way possible, she said.